In just a few years, cryptocurrencies have evolved from digital innovations to trillion-dollar technologies and have the potential to change the global financial system for years to come. This trend is especially true for young investors. In fact, a survey conducted by NORC at the University of Chicago found that most crypto investors are under the age of 40.
With their growing popularity, Bitcoin and other cryptocurrencies are considered worthwhile investments. Below, we highlight the five most important things to know about investing in crypto and share tips on how new and experienced traders alike can get started.
Cryptocurrencies Growing in Popularity
Investing in cryptocurrency has seen significant growth over the past two years as around 61% of investors started investing in crypto between 2020 and 2021 lived. The NORC survey also revealed that 26% of investors get their cryptocurrency investment information mostly through crypto exchanges.
As cryptocurrencies continue to gain traction, they are becoming an increasingly popular addition to investor portfolios. Moreover, there has been an increase in the number of retail and well-known institutional investors adding digital assets to their portfolios, helping to increase visibility and confidence for this asset class.
Experts Increasingly Recommend Crypto Investments
Many experts are asking when and how to use crypto if you make a decision. He joined the cryptocurrency discussion by providing insights on what to include in a portfolio.
Financial experts’ advice includes knowing your individual risk tolerance, being aware of your short- and long-term goals, and having a clear strategy. As with any other investment, it’s important to consider your overall allocations and how crypto might fit into your current asset mix.
Cryptocurrencies Can Be a Strong Addition to a Diversified Portfolio
With new currencies and digital assets entering the market, cryptocurrencies are increasingly becoming part of many diversified portfolios. And because crypto markets operate largely independently of other markets, price movements are often determined by factors other than those that affect stocks, bonds, and commodities.
With this in mind, investors who can tolerate volatility may want to consider allocating it to some type of cryptocurrency in their portfolio. Many experts recommend allocating anywhere from 1% to 5% on alternative investments such as cryptocurrencies, and finding your ideal allocation will depend on your unique investment goals.
Investing in Cryptocurrencies Carries a Certain Level of Risk
Due to high levels of volatility, the cryptocurrency market naturally carries a certain level of risk and price fluctuations are common. For example, between September 2021 and January 2022, the Bitcoin price rose from around $41,000 to $61,000 and then dropped back to $38,000. At the time of writing, it is trading at $29.00. Before you start investing in crypto, you should determine your risk appetite and implement a durable risk management strategy.
While cryptocurrencies are risky, they also have the potential to deliver huge returns. When Bitcoin started in 2009, the digital currency actually had little value. In the years that followed, it would leap to a fraction of a penny and eventually grow to tens of thousands of dollars. Earnings like this may be among the key benefits of investing in cryptocurrency.
Cryptocurrency Basics
When you have the right trading platform, getting the most out of your investments is faster than you think. it is easy. Amid the growing popularity of crypto investments, many investors are looking for a simpler way to trade a variety of digital assets.
As cryptocurrencies continue to gain attention, citizens of all ages are becoming more interested in learning about these unique assets. Whether you’re just starting out, a seasoned investor, or teaching your teen or young adult child to invest, having a solid foundation of crypto knowledge will keep you in good shape.
